In order for any business to succeed, it is important that the owner gain complete understanding with regards to market trends and conditions. The world of economics and finance has many different theories and techniques, which can enable a person to interpret and determine market c conditions. The Elliott Wave Theory is a common technique, used to interpret the price structures and market trends.
When making use of this theoretical frame, there are a few key market features that a person can learn. The most important point is market behavior and actions. This theory provides a comprehensive report of trends within a given market; based on which, a person can anticipate future market states to a favorable extent. This theoretical framework may not allow complete forecasting but, can give a fairly concrete picture of market conditions.
The main focus of this theoretical framework is on the recurrence of pricing and cost segments. This means highlighting and mapping different costs and prices, in a way that demonstrates repetition and consistency. This is a very useful aspect as it allows a person to determine future costs and expenses.
The framework also highlights market cycles and offers two distinctive waves that are known to occur within a given market. The first of these are called impulse waves, which can further be broken down into sub patterns comprising five structures. These structures are set over three distinctive patterns namely the extended waves, the diagonal triangle at wave five and lastly the fifth wave failure.
The second category of waves after impulse waves are known as corrective waves. These can further be broken down into six sub categories of waves. The categories are based on the direction and patterns of waves beginning from zig zag, to flat, irregular, horizontal triangle, double three and triple three patterns. Each pattern provides valuable insight with regards to market cycles and consistency.
When it comes to the interpretation of such patterns, main focus should ideally be placed on erratic behavior. This can be done by comparing the pattern of waves over different time intervals. When working in particularly active markets, it would be wise to calculate waves on a weekly or daily basis to ensure timely interpretation and forecasting.
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Erratic behavior can be seen in such patterns where waves break or change direction often. Consistency can be judged through such patterns of waves, which are smooth and recurrent throughout a given category. Intersecting waves can determine the level of instability within a given time period, while some intersections may show complete market crashes as well.
The correct execution of the principles, of this framework provides a person with a set of six pattern waves and three sub group waves. These put together can allow people to effectively interpret the future condition as well as future actions within a given market. The Elliott Wave Theory offers valuable footing for a wide range of industries and businesses. Correct implication and interpretation of patterns within this framework would allow safe and calculated steps within a market industry.
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